Oil prices fell on Wednesday after sources indicated that industry data would show an increase in U.S. crude inventories, but strong refining margins helped limit the losses.
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Brent crude futures dropped by 52 cents, or 0.7%, to $76.48 per barrel by 07:47 GMT, while U.S. West Texas Intermediate (WTI) crude fell by 54 cents, or 0.5%, to $72.78 per barrel.
This decline came after three days of gains, during which Brent rose by 3.6%, and WTI increased by 3.7%.
Kelvin Wong, Senior Market Analyst at OANDA, said in an email: "Recent movements in WTI crude seem to reflect profit-taking by short-term traders, awaiting the release of U.S. Consumer Price Index (CPI) data today."
Wong added that WTI crude is still trading below its 20-day and 200-day moving averages, which could limit the recent upward momentum, but this will depend on U.S. inflation data and whether it surprises.
The U.S. CPI data is scheduled to be released at 13:30 GMT on Wednesday. Analysts expect a slight slowdown in the core inflation rate for January to 3.1% year-on-year, while the headline figure is expected to remain unchanged at 2.9%.
Stability in inflation expectations would support expectations of stable interest rates, leading to little change in forecasts for oil demand.
According to sources citing data from the American Petroleum Institute (API), U.S. crude inventories rose by 9.4 million barrels in the week ending February 7.
Gasoline inventories fell by 2.51 million barrels, while distillate stocks (such as diesel and heating oil) decreased by 590,000 barrels, according to the same sources.
Official data from the U.S. Energy Information Administration (EIA) is expected later today.
The EIA raised its forecast for U.S. crude oil production but kept its demand outlook unchanged. It now expects U.S. oil production to average 13.59 million barrels per day in 2025, up from its previous estimate of 13.55 million barrels per day.
However, strong refining margins helped limit price losses. Singapore's complex refining margins regained losses from January, averaging $3 per barrel or more over the past week, according to pricing data from LSEG.
Sparta Commodities analyst Jon Goh said: "Current refining margins are strong, reflecting a rebound from the negative trend we saw last month. There is strong demand for refineries to operate at high capacity, especially with the upcoming seasonal maintenance in Northwest Europe and Asia."
